Critical DOT Mass

The DOT's now looking like the dominant Net-sector index, Cramer says.
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During this last go-round with the Web, one thing has changed: You can now bet with it or against it through the

The Street.com Internet Sector

index (and, no,

TheStreet.com

does not get any money from trades on the DOT). That's because the index now has a ton of open interest, much more than any other Net index. (And that includes the index

CNBC

now uses, the

Internet

index, or IIX, which is really a play on

Cisco

(CSCO) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

and

MCI WorldCom

(WCOM)

, not the Net as we know it.)

When the index started, buying a 10 lot was a major chore. The DOT was out there among a sea of indices, and no one knew which one would dominate. That's no longer the issue since the DOT has so much more activity than any other index. Now 50, 100 and even 200 lots are not a problem for market makers. They can be done pretty swiftly without moving the index itself.

This liquidity says two things. One is that the Net is no longer that hard to borrow. As long as Net stocks were tight, they were susceptible to being squeezed up. That's a thing of the past. And two, if you have a Net position and you want to hedge against an overall decline in the Net, you can do it quite easily.

This hedging has been a constant issue among my friends who are in start-ups and young Net companies or even in some of the majors. All of them now feel that their stocks have fallen as far as possible but believe the Net could fall further.

Why not buy some puts on the index as protection? I know I have done that. Of course, I own many shares of

TheStreet.com

(TSCM)

and buying 500 DOT puts won't make much of a difference. But a bet against the Net used to cost a fortune and didn't work well because of the premiums you had to pay. The premiums are still big, but the spreads between the bid and ask are no longer criminal. It can be traded for profit now. And it works.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco, Sun Microsystems and TheStreet.com. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.